Yen Drops as Stocks Advance; Dollar Trades Near 14-Month

The yen declined versus most of its
major counterparts as Asian stocks rose for a second day,
spurring investors to buy higher-yielding assets amid
expectations Japan will expand monetary stimulus.

The dollar approached its weakest in more than a year
versus the euro before data forecast to show U.S. growth and job
gains slowed. The Federal Open Market Committee will issue its
policy statement today. New Zealand’s currency fell before the
Reserve Bank sets interest rates tomorrow.

“There is a general upbeat tone to markets,” said
Jonathan Cavenagh, a currency strategist at Westpac Banking
Corp. in Singapore. “The Bank of Japan is going to maintain a
more dovish policy setting for longer. That’s what’s
underpinning this yen weakness.”

The yen slid 0.2 percent to 90.90 per dollar as of 6:53
a.m. in London. It lost 0.2 percent to 122.68 per euro. The
dollar traded at $1.3491, little changed from yesterday, when it
touched $1.3497, the lowest level since Dec. 2, 2011.

Japan’s currency is poised for a 4.6 percent drop against
the dollar in January. That would be a fourth month of declines,
the longest losing streak since August 2008.

The BOJ this month doubled its inflation target to 2
percent and agreed to open-ended asset purchases beginning 2014
as Prime Minister Shinzo Abe urged broader monetary easing in a
bid to boost growth and end more than a decade of price
declines.

‘Early Stages’

“From an economic perspective, the yen can still go much
weaker,” Ramin Toloui, global co-head of emerging markets
portfolio management in Singapore at Pacific Investment
Management Co., which oversees the world’s largest bond fund,
said in an Bloomberg Television interview. “We’re probably
still in the early stages of weakening in the yen.”

The yen declined 6.3 percent in the past month, the biggest
slide among 10 developed-nation currencies tracked by Bloomberg
Correlation-Weighted Indexes. The dollar lost 0.2 percent and
the euro climbed 2.1 percent.

The U.S. Commerce Department will probably say today the
nation’s gross domestic product advanced at a 1.1 percent rate
in the three months through December, according to the median
estimate of economists surveyed by Bloomberg News. That would be
the weakest since the first quarter of 2011.

Companies added 165,000 jobs in January, down from 215,000
the previous month, the Roseland, New Jersey-based ADP Research
Institute is forecast to say today according to a separate
Bloomberg poll.

‘Evenly Divided’

Federal Reserve officials will decide on policy today after
minutes of their December meeting released this month showed
participants were “approximately evenly divided” between those
who said it would be appropriate to end its third round of asset
purchases, known as quantitative easing, around mid-2013 and
those who thought the buying would need to continue beyond that.

“The U.S. economy continues to be weak,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth
Bank of Australia (CBA), the nation’s largest lender. “That will just
reinforce the perception in the market that the Fed’s asset
purchases will continue for a while yet, and that will weaken
the dollar.”

The Fed is buying $85 billion of Treasuries and mortgage
debt each month to boost economic growth and spur employment.

New Zealand’s currency, known as the kiwi, slid versus all
of its 16 major counterparts before central bank Governor Graeme Wheeler releases a policy decision tomorrow. All 16 economists
surveyed by Bloomberg News expect him to leave borrowing costs
at a record-low 2.5 percent.